Australia will not chase volume at the expense of price in this week’s Emissions Reduction Fund (ERF) auction, the chair of the Clean Energy Regulator said Tuesday, as developers were finalising their bids.
The Clean Energy Regulator is buying offsets, known as Australian Carbon Credit Units (ACCUs), on behalf of the government through ERF auctions.
The third sale is scheduled for Wednesday and Thursday this week.
“As always, my advice to participants is to maximise your prospect of success in the auction by offering the lowest price at which it is worth your while to undertake your project,” Chloe Munro, the regulator’s chair, said in a statement.
“Based on current registrations, we expect this auction to be highly competitive with good volumes on offer. At the same time, with a strong pipeline of new projects in the wings, we see no need to chase volume at the expense of price.”
Australia bought 47.3 million tonnes of CO2e at an average price of A$13.95/tonne ($10.02) in the first auction in Apr. 2015. In the next auction seven months later, it contracted 45.5 million tonnes at A$12.25 each.
Observers expect the price to drop further in this round as more projects have registered, including several industrial schemes that can cut emissions at low cost.
The government’s goal is to buy emission cuts as cheaply as possible, and no project types are preferred over others.
Ahead of each auction, the regulator sets an undisclosed benchmark price and buys 50-100% of the volume offered below that level. A week after the auction an average price is announced, but the regulator provides no information on the price range for successful offers.
In the first two auctions, the regulator spent nearly half its A$2.55 billion budget.
With no fresh funding in sight for the ERF, experts expect the two planned auctions for this year to be the last for a while.
But Munro was optimistic a secondary ACCU market is developing, meaning the government would no longer be the sole buyer of the offsets.
“We are already seeing some trade between uncontracted projects and contractors who are able to use ACCUs from any source to meet their delivery obligations,” she said.
“In future there may also be some demand for ACCUs from entities covered by the safeguard mechanism, which comes into force on 1 July this year.”
Around 600 projects have been registered with the Clean Energy Regulator so far. Of those, 275 secured government contracts in the first two auctions.
By Stian Reklev – email@example.com